Monthly technical roundup - August 2022

Increase to CSHC income thresholds

On 27 July 2022, the Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 (Cth) was introduced to Parliament.

The bill proposes to increase the Commonwealth Seniors Health Card (CSHC) income test limits to:

• $90,000 (currently $57,761) for singles;
• $144,000 (currently $92,416) for couples; and
• $180,000 (currently $115,522) for couples, separated by illness, respite care or incarceration (combined).  

If the bill passes both houses and receives Royal Assent, the above limits will be effective from the day the bill receives Royal Assent.

Electric cars exempt from FBT regime

On 27 July 2022, the Treasury Laws Amendment (Electric Car Discount) Bill 2022 (Cth) was introduced to Parliament.

The bill proposes to provide an exemption from fringe benefit tax (FBT) on zero or low emissions vehicles that are first held and used on or after 1 July 2022.

To be eligible, the value of the vehicle at first retail sale must be below the luxury car tax threshold for fuel efficient cars ($84,961 for 2022-23) and be held by the provider and used by or made available for private use of employees.

Manage excess transfer balance for complying income streams

In March 2022, the Government registered Treasury Laws Amendment (Allowing Commutation of Certain Income Streams) Regulations 2022 (the Regulations) which amended three regulations to provide for partial commutations of excess transfer balance amounts.  However, for certain products (e.g. market-linked and life-expectancy income streams), the partial commutation could result in the loss of the asset-test exemption for social security purposes.

As this was not an intended consequence of the regulation, the Government introduced the Treasury Laws Amendment (2022 Measures No. 1) Bill 2022 (Cth) to Parliament on 27 July 2022 to make the necessary amendments to the Social Security Act 1991 (Cth) and Veterans’ Entitlements Act 1986 (Cth) for the Regulations to take effect as intended.

Strengthening transparency on remunerations and bank disclosures

On 6 July 2022, APRA released two consultation papers aimed at improving the transparency and market discipline within the financial system.

• Remuneration requirements for all APRA regulated funds - focuses on new remuneration disclosure and reporting requirements for all banks, insurers and superannuation funds regulated by APRA;
• Public disclosure requirements for authorised deposit-taking institutions (ADIs) - focuses on APRA’s proposal to update bank prudential disclosures to align with international standards and the new bank capital framework.

The proposed remuneration requirements will support the cross-industry Prudential Standard CPS 511 Remuneration (CPS 511), which was introduced in August 2021, and is aimed at strengthening the remuneration practises across the banking, insurance and superannuation industries.

The consultation period for both papers closes on 7 October 2022.

New prudential standard to strengthen operational resilience

On 28 July 2022, APRA released a discussion paper and Draft Prudential Standard CPS 230 Operational Risk Management (CPS230) seeking industry feedback.

APRA has proposed to introduce a new cross-industry standard which outlines the minimum standards for managing operational risk, including updated requirements for business continuity and service provider management.

The consultation period closes on 21 October 2022.

Deeming rates frozen for 2 years

On 1 July 2022, the Government announced it had frozen the social security deeming rates for two years to 30 June 2024.

The lower deeming rate will remain frozen at 0.25% and the upper rate will remain at 2.25%.

More flexibility for jobseekers

On 28 June 2022, the Government announced ‘A clean slate and more flexibility for jobseekers’.

As a result, Workforce Australia replaced jobactive on July 4. Workforce Australia will centre around a points-based activation system that will give participants more choice and control over how they meet their mutual obligation requirements.

The following Centrelink entitlements have mutual obligation requirements:

• JobSeeker Payment;
• Youth Allowance (as a jobseeker);
• Parenting Payment (as a compulsory ParentsNext participant);
• Parenting Payment single (after youngest child turns 6); and
• Special Benefit paid under certain conditions.

More information can be found at servicesaustralia.gov.au.

Pandemic payments reinstated

On 16 July 2022, the Government announced that it had reinstated the Pandemic Leave Disaster Payment and Crisis Payment – National Health Emergency (COVID-19) until 30 September 2022.

The eligibility for these payments will also be backdated to 1 July 2022, with the existing eligibility requirements to continue.

Review of the Reserve Bank of Australia (RBA)

On 20 July 2022, the Government announced that it had released terms of reference regarding a review of the RBA’s monetary policy arrangements.

The review will assess:

• the RBA’s monetary policy arrangements and objectives, including the continued appropriateness of the inflation targeting framework;
• the interaction of monetary policy with fiscal and macroprudential policy, including during crises and when the capacity for monetary policy is limited;
• the RBA’s performance in meeting its objectives, including the choice of policy tools, implementation, communication and how the trade-offs between different objectives can be managed;
• its governance (including Board structure, experience, expertise, composition and appointment process) and accountability arrangements; and
• its culture, management and recruitment processes.

The final report, which will include a set of recommendations, will be provided to the Government no later than March 2023.

Review of Your Future, Your Super reforms

On 7 July 2022, the Government announced that they will review the operations of the Your Future, Your Super laws (YFYS laws) after the second round of MySuper performance tests have taken place (by August 2022).

The Government is aware of concerns that the YFYS laws have the potential to create outcomes by discouraging certain investment decisions or infrastructure investments, and has tasked Treasury to examine and consider operations of the new laws in this context. The review will also consider whether there have been any unintended consequences as a result of the reforms.

Details of the public consultation will be announced soon by Treasury and the Government will also release exposure draft legislation to adjust the performance test for faith-based products.

Revised view on Division 7A

On 13 July 2022, the ATO published a revised view on how Division 7A applies to trust entitlements created on or after 1 July 2022.

For trust entitlements created on or after 1 July 2022, the ATO will apply the view set out in TD 2022/11 Income Tax: Division 7A: when will an unpaid present entitlement or amount held on sub-trust become the provision of ‘financial accommodation’.

A private company beneficiary, that is presently entitled to income from a trust, is considered to have ‘provided financial accommodation’ to its shareholder or their associate if either the:

• private company beneficiary has knowledge of its entitlement, but doesn’t demand payment from the trust; or
• trustee holds an amount from the main trust fund on a new separate trust (a sub-trust) for the sole benefit of the private company beneficiary and all or part of the sub-trust is used by (or for the benefit of) the private company’s beneficiary’s shareholder or their associate and the private company beneficiary is aware of this use.

To avoid triggering Division 7A, the trustee must act before the private company’s tax return is lodged, or the date it’s due to be lodged (whichever comes first) to either:

• pay the private company its present entitlement; or
• enter a Division 7A complying loan agreement with the private company.

NALI relief ended

On 15 July 2022, the ATO reminded SMSF trustees and approved SMSF auditors that the relief and support offered to SMSFs financially impacted by the COVID-19 pandemic ended on 30 June 2022.

The relief measures, which applied in the 2019-20, 2020-21 and 2021-22 years include:

• SMSF residency relief;
• rental relief (including rental reduction, waivers and deferrals);
• loan repayment relief, including for limited recourse borrowing arrangements; and
• in-house asset relief.

As the relief and support measures have ended, the ATO expects trustees to now comply with their obligations under the income tax and super laws, and approved SMSF auditors to report contraventions to the ATO.

Guidance for super calculators and retirement estimates

On 5 July 2022, ASIC released Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG276) and a new legislative instrument, updating the relief which facilitates the provision of super calculators and retirement estimates.

The calculators and retirement estimates are tools trustees can provide to members as part of their strategies under the retirement income covenant.

The updated relief will also provide a greater level of flexibility in how trustees can give retirement estimates to their members and introduces a framework for setting economic and financial assumptions across both retirement estimates and super calculators.

The new legislative instrument took effect from 1 July 2022 and ASIC has provided a transition period of 6 months, during which providers of super forecasts may rely on either the existing relief or the new relief measure, which will be available from 1 January 2023.

New super publications to increase transparency

On 25 July 2022, APRA announced that it will launch a series of superannuation data publications from September 2022 to further enhance the quality and breadth of information for industry stakeholders.

The quarterly and annual publications will capture information on fees and costs, asset allocation, performance data for all products and investment options, as well as information on insurance arrangements, expenses and member demographics.

The publications represent a key milestone in APRA’s Superannuation Data Transformation, which is aimed at driving better industry practices and improve outcomes for superannuation fund members through heightened transparency.